Stardust, And Much More - Natural Gas Production Trends in the SCOOP and STACK, Part 3

Natural gas production from the oil- and condensate-focused SCOOP/STACK combo play in Oklahoma—one of the most productive plays in the U.S. currently—grew through 2016, even as other producing areas in the state, and in the Midcontinent as a whole, declined. As one of just a handful of locations that returning rigs are targeting, the SCOOP/STACK has the potential to single-handedly offset production declines in other parts of the U.S. Midcontinent and make Oklahoma a natural gas growth state again. Moreover, the RBN production economics model shows the natural gas output from the SCOOP/STACK has the numbers and the proximity to be directly competitive with gas supply from the Marcellus/Utica. Today, we continue our SCOOP/STACK series, with a look at the production economics driving interest in this play.

The SCOOP and STACK (acronyms for South Central Oklahoma Oil Province and Sooner Trend Anadarko Canadian Kingfisher, respectively) sit within an 11-county geographic area in central Oklahoma where drilling activity is targeting the oil-rich Woodford and Meramec shale formations of the Anadarko Basin (see Scoop-y Doo and All Come to Look for a Meramec). Producers have successfully exploited this area for decades but for a time production growth faded. More recently the region has been enjoying a revival of sorts as one of the most attractive shale plays in the U.S. Drilling activity has ramped up in recent years, led by Continental Resources in the SCOOP, and by Newfield Exploration in the STACK.

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As we noted in Part 1 of this series, oil production in Oklahoma nearly doubled from 205 Mb/d in 2011 to 398 Mb/d in 2014, based on Energy Information Administration’s (EIA) historical crude oil production data. With the oil price crash in late 2014, growth in Oklahoma production slowed in 2015. But as oil prices have climbed somewhat in recent months and rigs are returning, oil production in the state as a whole has begun to level off. Of course, oil production comes with associated gas, and a look at gas production data from our friends at PointLogic Energy by county corroborated that the renewed drilling activity is concentrated in just a handful of counties, specifically in the SCOOP and STACK plays. The data shows that while overall gross gas production volumes in Oklahoma are relatively flat, gains from the SCOOP/STACK counties are offsetting declines in other plays around the state. In other words, production from the growing SCOOP and STACK counties is becoming a larger share of overall Oklahoma production.

Back in 2013, SCOOP/STACK production was about 30% of the 5.5 Bcf/d total in Oklahoma. Just three years later (in 2016), it accounted for 40% of the nearly 6.9 Bcf/d total. This is because with crude oil prices relatively low, producers have been—and continue to be—quite picky about where they focus their rigs and they clearly are favoring SCOOP and STACK, and more specifically, a handful of the most productive and economical counties within SCOOP and STACK. As we showed in Part 2, Oklahoma rig counts were up 32 (60%) to 86 as of the December 30, 2016 Baker Hughes data, from the low of 54 rigs in mid-2016. As of the latest report last Friday (January 13, 2016), that count was slightly lower, with a total of 84 rigs operating in Oklahoma, but the geographic distribution remains about the same. Of those 84 rigs, just over 75% (64 rigs) are in the SCOOP/STACK counties, and out of those 64, about 85% are concentrated in just five counties, of which all but one are in the STACK.

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